Mortgage Rates Have Fallen for 3 Weeks in a Row. Is This the New Trend?

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  • The 30-year fixed-rate mortgage averaged 6.49% for the week ending Dec. 1.
  • While that's a sharp increase from December of 2021, it's a dip from the 7% mortgages borrowers were signing weeks ago.
  • This could be the start of a downward trend making borrowing less expensive.

Borrowing rates have been dropping, but will that continue?

One of the trickiest things about buying a home is locking in a mortgage at the right time. Borrowing rates can fluctuate from week to week, so it can be difficult to know if you're signing a mortgage at the right time, only to see rates drop seven days later.

Now in many cases, rates won't drop drastically from one week to the next. But at a time when mortgage rates are so high across the board, eking out even a small amount of interest-related savings could spell the difference between being able to comfortably afford a home or struggling to keep up with payments on one.

Meanwhile, there's been some good news on the mortgage rates front. Interest rates have now dropped for three weeks in a row. And for the week ending Dec. 1, the average 30-year mortgage rate was 6.49%. That's a nice decline from the 7% rates borrowers were facing weeks ago.

But while mortgage rates have been on a recent decline, they're still expensive. And the really big question is, will rates continue to fall? Or is this dip just temporary?

Borrowing could get less expensive across the board

Inflation has been a major problem for consumers since mid-2021. But things have started to cool in that regard. And this week, Federal Reserve Chair Jerome Powell said that the central bank might start slowing down its aggressive interest rate hikes as a result of dipping inflation levels.

That's a good thing not just for mortgage borrowers, but for borrowers across the board. Although the Fed doesn't set mortgage rates, or any consumer borrowing rates for that matter, when it hikes up the federal funds rate, which is what banks charge each other for short-term borrowing, it indirectly makes loans more expensive for consumers. If the Fed is now pumping the brakes on aggressive interest rate hikes, it could be enough to drive mortgage rates downward to a modest degree.

Of course, the key word here is "modest." It's highly unlikely that home buyers will get to enjoy the record-low borrowing rates that became available in 2020 and 2021. In fact, it's pretty fair to say that the days of signing a 30-year mortgage at 3% are long behind us.

But might mortgage rates fall to 6% by early 2023, or 5% by mid- to late-2023? That's possible. And if that were to happen, it would no doubt help address the affordability crunch so many buyers have been facing.

We'll have to wait and see

A steady decline in mortgage rates is definitely a good thing. But it's too soon to determine whether rates will keep falling, or whether the events of the past three weeks are just a temporary reprieve.

Either way, those looking to buy a home may want to get moving now, while rates are a bit lower. While we can be optimistic and hope that borrowing costs drop in 2023, the opposite could happen as well. So a good bet is to jump on a mortgage now that rates are at the lowest level they've been at for quite some time.

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